The recent change in the relationship between the Competition
Appellate Tribunal (COMPAT) and the Competition Commission of India
(CCI) has been studied in light of the appeal made in the case of
M/s GHCL Ltd. v. M/s Coal India Ltd. and M/s Western Coalfields
Ltd. (Case No. 08 of 2014) before the CCI.

Brief Background:

The Informant-GHCL, is a soda ash manufacturing and selling
Company. The Opposing Parties (OP) are the Central Government owned
Coal India Ltd. (here in after referred to as 'CIL'), and
its subsidiaries- Mahanadi Coalfields Ltd, Western Coalfields Ltd
and South Eastern Coalfields Ltd. CIL issued a Letter of Assurance
(LoA), NGP/WCL/S&M/C-12(348-B)/798 dated June 07, 2010, to the
Informant, who required coal for running its captive power plant,
calling upon it to fulfil various conditions precedent to enter
into a Fuel Supply Agreement (hereinafter referred to as
'FSA') for supply of coal. FSA was mandatory for commencing
supply of coal under the New Coal Distribution Policy, 2007
(hereinafter referred to as 'NCDP'). Informant was required
to execute a Memorandum of Understanding along with the FSA. The
terms and conditions of FSA were non-negotiable and any delay or
failure to execute the FSA within the stipulated time period would
result in the invocation of the bank guarantee issued by the
Informant. The Informant was required to furnish a Commitment
Guarantee (CG) in the form of a bank guarantee of INR 1, 00,
38,900, equivalent to 10% of the base price of indigenous coal as
on the date of application for issue of LoA. Pursuant to this, the
Informant claimed that the opposing parties were abusing its
dominant position and thus acting in contravention of the
Competition Laws.

Issues:

What is the relevant market in the
present case?

Whether the Opposite Parties are
dominant in the said relevant market?

If the Opposite Parties are in a
dominant position whether they have abused their dominant position
in the relevant market?

Contentions of Informant:

The opposing parties have abused
their dominant position by dictating the terms and conditions of
supply of coal through LoA, FSA and MoU, which are not in
accordance to the NCDP. The Deemed Delivered Quantity (DDQ) clause
gave undue power to opposing parties to avoid liability for short
supply. Severe operational and maintenance problems were caused due
to supply of inferior quality of coal by the opposing parties,
thereby forcing the Informant to purchase quality coal from
alternate sources.

When the Informant contested the
clauses in the MoU, the opposing parties threatened to encash the
commitment bank guarantee furnished by the Informant, pursuant to a
clause in the LoA.

E-auction conducted by the opposing
parties increased their revenue by 36% but made them unable to meet
their contractual commitments like Annual Contracted Quantity (ACQ)
to consumers under FSAs. The Informant was forced to engage
alternative sources to obtain additional supply of coal.

Contentions of Opposite Party (OP):

CIL does not hold a dominant position
because there are a number of other significant active players in
the global market.

It cannot be said that CIL used its
dominant position to make the Informant sign the MoU as despite
being provided ample opportunity, of nearly 2 years, to raise
objections, the Informant silently signed the MoU and only brought
up this issue before the Commission.

Being owned and controlled by the
Government it is not driven purely by a profit motive and its
social responsibilities take precedence over its commercial
interests.

Office of the Coal Controller (CCO),
and the sampling and analysis process is in accordance to Bureau of
Indian Standard. CCO rules also provide for a statutory complaint
mechanism which can be exercised by any customer who is not happy
with the grade of coal that is being supplied to it. Thus, the
absence of a clause specifically providing a customer with the same
remedy cannot be seen as discriminatory treatment, as the right to
do so does not affect the ability of the customer to exercise
his/her rights.

The findings of the Director General
Report are nothing but a reproduction of the findings of the
Commission which were used in previous cases.

The allegation that the coal was
being diverted towards e-auction is false. As WCL could not have
foreseen the short lifting on the part of the power consumers at
the time of entering into FSA and MoU.

It was prayed on behalf of WCL that
the Informant has misrepresented the facts and has not approached
the Commission with clean hands.

Held:

CCI found the Informant's allegations prima facie
true and asked its investigation wing- DG's office, to probe
into the matter. The DG report stated that-

The conditions imposed by the
opposing parties in LoA, FSA and MoU were unfair and discriminatory
including reduction of the quantity of supply, trigger level for
penalty and DDQ.

WCL's conduct of asking the
Informant to extend CG or face the consequence of encashment of
Bank Guarantee, was found to be abusive under section 4(2)(a)(i) of
the Competition Act.

It appears that the plea of CIL has
no force. The Informant's contention that the quality of coal
supplied by WCL was of inferior quality is accepted.

The relevant geographic market was
taken as the whole of India by the DG as the conditions for supply
of coal in the entire country are uniform and homogeneous.

Pursuant to the Coal Mines
(Nationalization) Act, 1973, production and distribution of coal is
in the hands of the Central Government, therefore, CIL and its
subsidiary companies have been vested with monopolistic power in
this regard. Further, coal companies have acquired a dominant
position due to the New Coal Distribution Policy (NCDP).

Opposing Parties have not produced
any document material to substantiate the terms of the FSA, LoA and
MoU. Further, the purchaser had no option but to accept the terms
and conditions of MoU as there was no scope for negotiation.

The Commission, in agreement with the
DG, is of the opinion that opposing parties have contravened the
provisions of section 4(2)(a)(i) of the Act by imposing unfair and
discriminatory conditions in FSA upon the Informant.

In view of the above points the
following order was passed:

Opposing Parties are directed to
cease and desist from abusing its dominant position.

Opposing Parties are to take remedial
steps within 60 days from the receipt of this order.

A penalty of Rs. 1773.05 Crores have
been imposed upon them.

Opposing Parties preferred an appeal before the Appellate
Tribunal. Therefore, the directions relatable to the clauses and
conduct which are also subject matter of this order would be
subject to the decision of Competition Appellate Tribunal
(hereinafter referred to as the 'COMPAT').

The COMPAT observed that it has repeatedly been held by the
Supreme Court that the quasi-judicial Commission is "bound to
comply with different facets of the principles of natural
justice."

Conclusion:

There has been a remarkable change in the outlook of the COMPAT
regarding the judgments passed by CCI. The shift in trend which
seems to have begun in 2015, simply cannot go unnoticed. In the
Board of Control for Cricket in India (BCCI) v. CCI
case (decided on February 23, 2015) it was held by
COMPAT that the order passed by CCI was a blatant violation of the
settled principles of natural justice and was liable to be set
aside only on that ground. The same was reiterated in the case of
All India Organization of Chemists and Druggists v.
CCI (decided on April 27, 2015). Further on December
11, 2015, COMPAT had revoked the Commission's order that
imposed a combined penalty of INR 6,316 crore on 11 cement
companies for allegedly forming a price cartel on the same grounds
of ignorance of principles of natural justice. It is a matter of
concern that the CCI has been nonchalant in its administration of
justice and has time and again ignored the principles of natural
justice. The fact that COMPAT is taking notice of such astonishing
lapse in law is a positive sign that will herald a fairer and more
just implementation of law.

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